Magazine article American Banker

1,800 Pink Slips Coming at Wachovia: Expects the 8.5% Cut to Boost Profits $425 Million by 2002

Magazine article American Banker

1,800 Pink Slips Coming at Wachovia: Expects the 8.5% Cut to Boost Profits $425 Million by 2002

Article excerpt

Wachovia Corp. said Monday that it would eliminate 1,800 jobs, almost 8.5% of its work force, in a plan to reinvigorate profit growth.

The Winston-Salem, N.C., banking company said it would take up to $100 million in pretax charges related to the restructuring, mostly in the third quarter. The company projected that the cuts would reduce annual expenses by $100 million and result in an increase of $425 million in pretax profits by 2002.

L.M. "Bud" Baker Jr., Wachovia's chairman and chief executive officer, said the decision to cut staff came after a strategic review that began last year and was focused on finding ways to increase revenues, inject capital in growth businesses, and control expenses.

Mr. Baker said in an interview that while his outlook is generally positive, recent economic trends indicated that "it is a challenging world, and performance will be particularly difficult."

It was the latest piece of bad news from the $70.8 billion-asset banking company, which like many other regional banks has been struggling to maintain momentum in the face of rising interest rates.

In June, Wachovia said steadily rising rates had pinched off growth in revenues from capital markets, mortgages, and investment services businesses. As a result, the company said, profit growth for the year would not meet expectations.

An increase in nonperforming assets, particularly from exposure to a single syndicated credit, also forced Wachovia to increase its provision for loan losses in the second quarter by $200 million.

The consensus for yearend profits was $4.66 a share Monday, far below the $5.45 consensus tracked by First Call/Thomson Financial before the June earnings warning.

Mr. Baker said that Monday's announcement came from just one of 14 ongoing projects within the company that are designed to eliminate inefficiencies and identify growth opportunities. …

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